CREDIBILITY OF MONETARY POLICYMiladin Milošević |
Number 9 |
ABSTRACT
A credible monetary policy is the precondition for efficient implementation of the economic policy measures in sense of lowering of the uncertainties faced by the economic agents. In the countries which adopted monetary policy regime with active managing of the monetary policy, it is very important to create an economic environment where the decisions of the monetary authorities have to be implemented in the way they were announced. The monetary authorities, who are not able to implement the policies they have announced, limit the economic development and efficiency of the economic system. On the market, economic agents act rationally and make their decisions on basis of previous moves by the monetary authorities, as well as on basis of predictions on how the monetary authorities shall behave in the future. The economic planning is a sort of a play of the monetary authorities with rational economic subjects, so it should be both observed and created in such context.
Keywords: monetary policy, inflation, credibility, time consistency, central bank independence.